Opportunities in Emerging EU Wealth Markets

The emerging EU markets are accumulating wealth considerably faster than the mature EU economies; they are forecast to be the most important onshore centre in terms of growth by 2007.

Opportunities in Emerging EU Wealth Markets, written by Gregor Broschinski, not only analyses the opportunities for private banking and wealth management, but also provides unique insights into the strategic management of this growth potential - the key competitive challenge for these markets. In particular:

• What is the scale of the market potential and how sustainable is the growth potential?
• What does the competitive environment look like?
• Is there a 'right' strategic approach to market entry and development?
• What do the client profiles look like, how do they differ from the mature markets, and what differentiation strategies should be used to address them?
• What are the additional opportunities in maturing markets provided by product development based on emerging EU asset classes like stocks, bonds, and real estate and what are the investment constraints?
• How should strategy differ for domestic players and foreign entrants?

Opportunities in Emerging EU Wealth Markets answers the information needs of professionals in wealth management, private banking, retail banking, funds, brokerage, and consultancies looking for analysis and perspectives on market and product development strategies for these growth economies. It's essential information for those already present and those considering entry - and may even change the minds of those who do not intend to enter.

• Executive summary
  • Outline of the report

• Chapter 1 - Introduction
  • Background: European financial services and EU expansion
  • The higher value segment
  • Differentiation

• Chapter 2 - Private banking and wealth management: the clients and the products
  • Definitions for a client segment-focused business
  • Strategic evolution of private banking and wealth management in mature Europe
    • Growth: the main challenge in onshore European private banking
    • European offshore private banking under pressure
  • Main business approaches
    • Historical and regional
    • Client segment
    • Core and non-core businesses
  • Market analysis and outlook for mature EU markets
    • The global context
    • The HNWI/UHNWI market segment
    • The affluent segment
    • EU 15 markets overall
    • European competitive landscape
    • Differentiation criteria for mature European markets
    • Client selection criteria

• Chapter 3 - Growth in an enhanced EU environment
  • Growth in both mature and 'new' Europe
    • Advantages of the EU's common regulation
    • Monetary union and the euro
  • The product/market matrix approach
    • Output
      • Market penetration
      • Market development
      • Product development
      • Diversification
    • Drawbacks
  • Core directions for a growth strategy model

• Chapter 4 - Growth opportunities: a market development strategy
  • Market size by gross population analysis
    • Income distribution analysis by Gini coefficient data
    • Average financial wealth of population
      • Regional concentration of wealthier parts of the population
    • The HNWI/UHNWI segment
    • The affluent segment
    • The emerging EU markets overall
    • Comparison of mature EU and emerging EU markets
  • Client behaviour and profile in emerging EU markets
    • Typical wealth portfolio breakdown in the new EU
      • Differences between mature and emerging EU countries
      • Origins of client wealth
      • Usage of distribution channels
      • Development of wealth held offshore
      • Wealth portfolio summary
    • Current competitive landscape in the emerging EU markets
      • Core business models and generic strategies for market development
      • Emerging private banking services
      • The retail trade-up strategy
      • The traditional wealth management providers: the offshore and offshore 'plus' strategy
      • The Vienna hub approach
    • Conclusions for the competitive environment
    • Non-core business models
  • Country case study: Slovakia - a booming economy in the heart of Europe
    • A first class example of a market development strategy: UniBanka
    • Emerging private banking services in Slovakia: key questions and answers
  • Market development strategy summary for the emerging EU markets

• Chapter 5 - Growth opportunities: a product development strategy
  • Behaviour of clients towards investments in emerging EU markets
  • Investments in the securities market
    • Bond markets: The convergence story has nearly come to an end
    • Stock markets: the outlook remains positive
      • Main investment constraints and risks - indications for product development
    • Emerging product development trends
      • The active management approach
    • New benchmark indices and the index-orientated approach
      • The CECE Index family
      • The Dow Jones Stoxx EU Enlarged indices
      • Erste Bank's New Europe Blue Chip Index, NTX
    • Conclusions for securities-related products
  • Property investments
    • Favourable investment rationale
    • Main investment constraints and risks for product development
    • Emerging product development trends
  • The development of new products based on emerging EU markets

• Chapter 6 - The survey method and hypotheses
  • Survey participants
  • The core hypotheses and research assumptions
    • Research issues on growth through strategies of market development and diversification
    • Research issues on growth through mature EU product development strategies

• Chapter 7 - The research results
  • Introduction
  • Emerging EU markets - results for market development
    • Relevant business models for emerging EU markets
    • Current and future client potential
    • Current and expected competition
    • Future offshore wealth development
    • Assessment of differentiation and client selection criteria
    • Correlation of inequality in wealth distribution and market position
    • Specific client profile and product development indications for emerging EU markets
    • Business model expectations regarding future growth
  • Mature markets - product development indications
    • Expected growth opportunities by product development
    • The main constraints limiting growth
    • Product design and differentiation criteria
    • Business models that most favour systematic product development
  • Conclusions

• Chapter 8 - Conclusions
  • Management summary for business practice
    • Market development/diversification strategies for the emerging EU markets
  • Recommendations for market development/diversification strategies
    • Universal and retail expanded providers in private banking/wealth management
    • Traditional providers in private banking/wealth management
    • Overview of suggested imperatives for the strategic management of market development
  • Development strategies in mature markets for products based on an emerging EU market
    • Recommendations for product development strategies
      • B2C provider types
      • B2B provider types
    • Overview of suggested imperatives for strategic management of product development
  • Main implications for future research

• Appendix A - References and further reading

• Appendix B - The survey participants

• Tables
  • 2.1: 'State of the art' range of products and services in private banking and wealth management
  • 2.2: Client wealth band definitions in private banking and wealth management
  • 2.3: Most important European onshore centres in terms of growth, 2005, 2007
  • 2.4: Historical and regional business models
  • 2.5: Core client segment-orientated business models
  • 2.6: Non-core client segment-orientated business models
  • 2.7: Distribution of HNWI/UHNWI individuals/population in mature EU markets
  • 2.8: Distribution of affluent individuals/population in mature EU 15 markets
  • 2.9: Population and assets, mature EU 15 markets
  • 4.1: Structure of population within the enhanced EU 25
  • 4.2: Distribution and growth of HNWI/UHNWI individuals in the new EU countries
  • 4.3: Distribution and growth of affluent individuals in the new EU countries
  • 4.4: Overall market data for emerging EU markets
  • 4.5: Comparison of mature EU markets and emerging EU markets
  • 4.6: Financial wealth by instrument, 2003
  • 4.7: Top five international banks in CEE, by business volume and number of branches
  • 4.8: Eastern Europe - 'best provider of offshore services', 2005
  • 4.9: Generic strategies for market development in emerging EU markets
  • 5.1: CEE bond markets convergence spread
  • 5.2: Correlation of the CECE and Stoxx EU Enlarged TMI vs. MSCI
  • 5.3: CECE Composite index composition as of August 2005
  • 5.4: Composition of the Dow Jones Stoxx EU Enlarged 15 Index, August 2005
  • 5.5: Property performance correlation matrix for major capitals of Europe
  • 5.6: Property market transparency and risk rating
  • 7.1: Assessment of expected future client potential by country
  • 7.2: Clients' enthusiasm for property market investments, by country
  • 7.3: Clients' enthusiasm for securities market investments, by country
  • 7.4: Core hypotheses' consistency check
  • 8.1: Main general imperatives for market development strategies
  • 8.2: Main general imperatives for product development strategies on an emerging EU market basis

• Figures
  • 2.1: Key challenges for the private banking industry
  • 2.2: Distribution of HNWI/UHNWI global wealth, 2004
  • 3.1: Product/market matrix
  • 3.2: Core directions of the growth strategy model
  • 4.1: Gini coefficient income data within the enlarged EU 25
  • 4.2: Relative prices of core banking services versus GDP per inhabitant, 2005
  • 4.3: Deutsche Bank's Vienna hub strategy
  • 4.4: Growth of total net assets of mutual funds in core emerging EU markets, 1999-2004 (%)
  • 4.5: Distribution of net asset volume in mutual funds in core emerging EU markets, 2004
  • 5.1: Shares held by non-resident investors
  • 5.2: Stock market capitalisation of EU accession countries, July 2005
  • 5.3: Erste Bank's New Europe Blue Chip Index (NTX) composition, September 2005
  • 5.4: Yields for office properties (prime locations) in Europe (%)
  • 5.5: European prime rents for office properties (prime locations) in euros
  • 5.6: Most interesting EU accession countries for property investments
  • 5.7: German closed-end property funds investment targets by region, 2004
  • 7.1: Survey participants by business model type
  • 7.2: Participation by survey question set answered
  • 7.3: Relevant business model types for emerging EU markets
  • 7.4: Current potential for private banking by client segments in emerging EU markets
  • 7.5: Long-term potential for private banking by client segments in emerging EU markets
  • 7.6: Is wealth management currently mostly distributed by retail banking organisations?
  • 7.7: Is the current importance of traditional foreign wealth managers only modest?
  • 7.8: Private banking - an organisational part of its own in many banks in emerging EU markets?
  • 7.9: Current competition for wealth management services in emerging EU markets
  • 7.10: Expected competition for wealth management services over the next five years in emerging EU markets
  • 7.11: Expected development in offshore wealth of emerging EU markets
  • 7.12: Correlation of a future euro adoption and offshore investment behaviour
  • 7.13: Correlation of taxation harmonisation/regulatory changes and offshore services' attractiveness
  • 7.14: Importance of differentiation criteria for business models in emerging EU markets
  • 7.15: Importance of client selection criteria for emerging EU markets
  • 7.16: Correlation of inequality in public wealth distribution and market position in emerging EU markets
  • 7.17: Origin of clients' wealth in emerging EU markets
  • 7.18: State of investment style sophistication for private banking client segments in comparison with retail clients
  • 7.19: Adoption of portfolio structures by private banking clients and use of more risky products in emerging EU markets
  • 7.20: Should product offerings in private banking mainly be the same as for retail clients?
  • 7.21: Should product design mainly be the same as in mature Europe?
  • 7.22: Is less risky product design an important differentiation currently?
  • 7.23: Do clients prefer investments via managed products?
  • 7.24: Best growth rates through mutual investment funds?
  • 7.25: Are clients more self-directed and self-informed in the emerging EU markets?
  • 7.26: Is the client's home bias low - are foreign markets and currencies actually on top of the list?
  • 7.27: Expected future importance of typical private banking product offerings
  • 7.28: Expectation for business models most in favour for growing the affluent market in the emerging EU
  • 7.29: Expectation for business models most in favour for growing the HNWI/UHNWI market in the emerging EU
  • 7.30: Expected growth effects by product development
  • 7.31: Revenues contributed by new products based on emerging EU markets
  • 7.32: Best sales opportunities for new products with an emerging EU market asset class basis
  • 7.33: Main investment constraints for the emerging EU markets
  • 7.34: Level of client preference for managed funds products and index trackers
  • 7.35: Preference for clearly focused or 'mixed area' products
  • 7.36: Best growth opportunities, by product type
  • 7.37: Business models that most favour systematic product development with an emerging EU market basis